Publication Details

Al Mutairi, M., Tian, G. & Tan, A. (2009). Corporate finance practice in Kuwait: a survey to confront theory with practice. 22nd Australasian Finance and Banking Conference (pp. 1-26). Sydney, Australia: Social Science Electronic Publishing, Inc.


This study reports the results of a survey among 80 CFOs in Kuwaitilisted firms on current corporate finance practices namely, capitalbudgeting, costs of capital, capital structure, and dividend policy.This paper analyses specifically the survey responses according tothe firm s attributes and CFO s characteristics such as firm size,sector, equity, CFO s education, ownership, tenure, age, and targetdebt ratio. The results of this survey-based analysis indicate thatthere is some evidence of the application of basic corporate financetools that are inline with what is taught in classrooms. For example,we find that a surprising number of firms are widely using IRR nowas a capital budgeting techniques for decisions making todaydespite its limitation. The CAPM is also in use now to estimate thecost of equity capital whereas WACC remains the most popular usedmethod due the simplicity of the tax system in Kuwait. We findsome support for the Bird-In-Hand dividend theory. We also findthat firms do not have any particular source of capital structurechoices when it comes to how best finance their projects as is thecase in the US market. This finding reveals that finance theory is notyet fully implemented. The results also indicate that corporatefinance practices vary depending on firm and managementcharacteristics.

Link to publisher version (URL)

Australasian Finance and Banking Conference